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A Hand Up

Urban, minority entrepreneurs are hotter than ever--so where is their funding?

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This story appears in the September 2003 issue of Entrepreneur. Subscribe »

This year appears to be both the best of times and the worst of times for small, urban minority-owned businesses. Venture capitalists and large financial institutions are stepping up investments in minority-owned companies. Yet at the same time, some of the traditional backers of minority entrepreneurs--small local banks--appear to be slashing commitments to companies owned by African Americans, Asian Americans and Hispanics. Minority entrepreneurs have also been feeling the pinch while Congress debates whether to fund certain SBA programs.

Venture capitalists, large financial institutions and other forms of private equity appear to be realizing that minority-owned businesses are becoming a major market. In April, Merrill Lynch announced it would drastically expand its program for providing capital and advice to minority entrepreneurs. Other major investment houses such as Goldman Sachs have also created programs that fund minority businesspeople or establish VCs to target private equity to minorities. Meanwhile, several leading minority-managed VCs have weathered the economic downturn and are considering expanding. "The minority-owned VCs have done OK because they invest less money at one time than traditional VCs, so they're more diversified," says William Bradford, an expert on minority-owned businesses with the University of Washington, Seattle.

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